Business Intelligence generally refers to a category of software systems and applications used to improve business enterprise decision-making and governance. These software tools provide techniques for analyzing and leveraging enterprise applications and data. They are commonly applied to financial, human resource, marketing, sales, service provision, customer, and supplier analyses. More specifically, Business Intelligence tools can include reporting and analysis tools to analyze, forecast and present information, content delivery infrastructure systems to deliver, store and manage reports and analytics, data warehousing systems to cleanse and consolidate information from disparate sources, integration tools to analyze and generate workflows based on enterprise systems, database management systems to organize, store, retrieve and manage data in databases, and performance management applications to provide business metrics, dashboards, and scorecards, as well as best-practice analysis techniques for gaining business insights.
In many organizations establishing business strategies is an increasingly complex exercise. There are ongoing efforts to supply quantitative tools to enhance business strategy decision making. In particular, there is an increasing focus on performance management applications that provide a quantitative framework for analyzing various business metrics. A business metric is a measure used to evaluate a quantifiable component of an organization's performance. For example, business metrics may include return on investment, revenues, sales volume, inventory levels, cycle times, supply chain costs, number of customers, and so on.
One type of a business metric is characterized as a Key Performance Indicator (“KPI”). A KPI is the measure of performance of an activity that is critical to the success of an organization. KPIs are used in Business Intelligence to assess a business strategy and to prescribe a course of action. The business strategy should have clear goals and performance requirements that are quantifiable.
At any given time, there may be hundreds of KPIs that could be monitored by the organization. Only a small percentage of those will likely drive and impact a given business strategy. Because KPIs directly affect business strategy decision making, they must be carefully selected depending on the nature and objective of an organization.
As an example, consider a retail organization trying to optimize its performance. The retail organization may select various KPIs that measure sales performance and expenses so that it can achieve its objective of maximizing sales and controlling expenses. The KPIs may be customized for each member of an organization to measure performance that is relevant to the responsibilities at that member's level. For example, an accounts receivable associate may have “receivables less than 30 days” as a KPI to ensure the associate's goal fits with the corporate objective of increasing profitability. A distribution associate may have “mispicks” in store distribution routines as a KPI to ensure the associate is working towards the corporate goals of maximizing efficiency and increasing customer satisfaction, both of which also serve to maximize profitability.
With multiple KPIs to monitor across multiple departments and divisions, it is imperative that the organization have tools in place to improve organizational effectiveness. There are a number of commercially available tools that can monitor KPIs and other business metrics in stand-alone performance management applications or packages integrated into the tools. For example, Business Objects Americas of San Jose, Calif., sells a number of widely used Business Intelligence and performance management tools that can monitor KPIs, including Crystal Xcelsius™, BusinessObjects Performance Manager™, BusinessObjects Enterprise™, BusinessObjects XI™, and BusinessObjects Dashboard Builder™, to name a few. These tools include various frameworks for KPI monitoring, including visualization frameworks such as performance dashboards and scoreboards.
Dashboards provide a consistent way to track actual activity and results with benchmarks and thresholds to measure against. With performance dashboards and scoreboards, each employee and department can view the KPIs that are important to them and manage individual targets (i.e., sales by region, cost of sales, profit margin, etc.) so they can improve performance, speed, and effectiveness. Those targets can then be rolled up across functional areas, departments, and business lines to provide high-level views of the organization's performance.
To be effective and successful in its performance management goals, selected KPIs should be consistent across the organization's functional areas, departments and business lines. Lack of consistency in the KPIs monitored for a given business process or strategy may lead to conflict and thus failure in achieving the goals and performance requirements of the organization. In the example above of a retail organization trying to optimize its profits, one retailer may have sales volume as a key indicator for operations, while one of its key merchants may be focused on gross product margin. This leads to conflict, as the operations team may want to reduce price as one method of driving sales volume, but this price reduction will by definition reduce the gross margin percent of the sale.
Managing KPI conflict is therefore critical to an organization's success. KPIs should be selected and monitored by clearly identifying the cause-and-effect relationships that need to be managed for the best overall performance. When conflicting KPIs are monitored in isolation without a clear sense of whether they support the achievement of the overall performance goals, targets may be missed, resources allocated improperly, and operational efficiency may be less than ideal.
Currently-available performance management tools allow users to measure, visualize, and analyze KPIs. However, they do not rigorously examine the relationships between KPIs and the overall organizational strategy. There is no performance management tool available today that offers users the capability to treat KPIs as a whole and provides a quantifiable measure to track possible undesirable outcomes. That is, there is no performance management tool available today that provides a mechanism to identify and rationalize conflicting KPIs. As a result, an organization may be required to devote considerable resources analyzing KPIs to determine any conflicts that may detract the organization from achieving its performance goals.
Accordingly, it would be desirable to provide techniques to address the shortcomings of existing performance management tools. In particular, it would be desirable to provide a technique to ensure that a given KPI is aligned with the organization's overall performance goals.